Delhi High Court

Delite Kom Ltd. vs Union Of India & Ors on 24 March, 2015

Author: Rajiv Sahai Endlaw

            *IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                     Date of decision: 24th March, 2015
                 W.P.(C) No.7498/2014 & CM No.17749/2014 (for stay)
        DELITE HI-TECH FURNITURE
        INDUSTRIES PVT. LTD.                                            ..... Petitioner
                                Through: Mr. S.K. Sharma, Mr. Rahul Sharma, Mr. Archit
                                         Vasudev, Mr. Prayas Aneja and Mr. Puneet Relan,
                                         Advs.
                                               Versus
        UNION OF INDIA & ORS                                        ..... Respondents
                                Through: Mr. Sanjay Jain, ASG with Mr. Amit Mahajan,
                                         CGSC for UOI.
                                         Mr. Arvind P. Datar, Sr. Adv. with Ms. Surekha
                                         Raman and Mr. Anuj Sharma, Advs. for R-3.
                                       AND
+                  W.P.(C) No.7506/2014 & CM No.17760/2014 (for stay)
        DELITE KOM LTD.                                               ..... Petitioner
                                Through: Mr. S.K. Sharma, Mr. Rahul Sharma, Mr. Archit
                                         Vasudev, Mr. Prayas Aneja and Mr. Puneet Relan,
                                         Advs.
                                               Versus
        UNION OF INDIA & ORS                                        ..... Respondents
                                Through: Mr. Sanjay Jain, ASG with Mr. Amit Mahajan,
                                         CGSC for UOI.
                                         Mr. Arvind P. Datar, Sr. Adv. with Ms. Surekha
                                         Raman and Mr. Anuj Sharma, Advs. for R-3.
                                      AND
+                W.P.(C) No.7510/2014 & CM No.17766/2014 (for stay)
        ROYAL SAFE COMPANY (KB)                                        ..... Petitioner
                                Through: Mr. S.K. Sharma, Mr. Rahul Sharma, Mr. Archit
                                         Vasudev, Mr. Prayas Aneja and Mr. Puneet Relan,
                                         Advs.
                                               Versus
        UNION OF INDIA & ORS                                        ..... Respondents
                                Through: Mr. Sanjay Jain, ASG with Mr. Amit Mahajan,
                                         CGSC for UOI.
                                         Mr. Arvind P. Datar, Sr. Adv. with Ms. Surekha
                                         Raman and Mr. Anuj Sharma, Advs. for R-3.

W.P.(C) No.7498/2014, W.P.(C) No.7506/2014 & W.P.(C) No.7510/2014             Page 1 of 26
      CORAM :-
     HON'BLE THE CHIEF JUSTICE
     HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
     RAJIV SAHAI ENDLAW, J.

1. The challenge in these petitions is to the Tender Enquiry No. GIOF/HW-

3/RC-H7010000/1214/43 dated 27th December, 2013 issued by the respondent

no.2 Directorate General of Supplies & Disposals (DGS&D) and also to the

consequent Rate Contract dated 1st January, 2014 / 28th January, 2014 entered

into by the DGS&D with respondent no.3 Godrej and Boyce Manufacturing

Co. Ltd. (Godrej) for supply of Godrej Interio Office Furniture. The said

Tender Enquiry was as under:-

S. No.     TENDER        DESCRIPTION OF STORES                                DTE.   DUE TO       PRICE OF
           ENQUIRY                                                                   OPEN &       TENDER
           NO.                                                                       TIME         SET
2.         GIOF/HW-      1. Jefferson Presidential Suite. 2. Viva 3. Elan     HW     27.12.2013   Rs.5000
           3/RC-         Veneer Desk 4.Elan Veneer ERU 5. Elan Veneer                03:00 PM

H7010000/1 Credenza 6. Elan Laminate Main Desk 7. Elan 214/43 Laminate ERU 8. Elan Laminate Credenza 9. WT Series 10. Unitised Tables 11. Encarta Conference Table 12. Greenguard Certified Scholar 13. Regency Series 14. Kubix series 15. Economy Executive Chairs 16. 7031/7032 17. Classic Range 18. Storage Range 19. Optimizer with 381 depth 20. Optimizer with 457 depth 21. Smart Opos Modules 22. Halo Series

2. It is the contention of the petitioners:- (i) that majority of the items

mentioned in the said Tender Enquiry were reserved for Micro, Small &

Medium Enterprises / Small Scale Industries sector and were vide Note dated

16th December, 2013 i.e. shortly before the aforesaid Tender Enquiry, taken out

of the reserved category leaving only six items in the reserved category;

furniture items however continue to remain reserved for Small Scale Industries

(SSI) and the aforesaid Tender Enquiry in so far as qua furniture items is in

violation of the DGS&D Manual; (ii) that the Note dated 16th December, 2013

was circulated to different departments of DGS&D only on 15th January, 2014

i.e. after the Tender Enquiry and after entering into the Rate Contract dated 1 st

January, 2014 with Godrej; (iii) that DGS&D, by including "GIOF" in the

Tender Enquiry and which stands for "Godrej Interio Office Furniture"

restricted the tender to only items of Godrej brand; (iv) the aforesaid was thus a

single party tender and was floated on 27th December, 2013 with date and time

of opening thereof at 1500 hours on the same day; (v) shortly thereafter, on 1st

January, 2014, in pursuance thereto Rate Contract valid for 24 months with the

provision for revision of price after 12 months was entered into with the

respondent No.3 (and which was amended on 28th January, 2014); (vi) that the

practice of calling such single brand quotations has repeatedly been deprecated

by the various Government departments themselves; (vii) that most of the items

mentioned in the Tender Enquiry aforesaid are furniture items manufactured by

several well known companies and the Tender Enquiry specifying the brand

was floated to favour Godrej; and, (viii) award of single party Rate Contract is

monopolistic, against public policy and against the basic principles of

transparency.

The petitions were accompanied with an application for interim relief for

restraining the respondents from making any purchase / supply under the Rate

Contract aforesaid.

3. Notice of the petitions as well as applications for interim relief was

issued. Counter affidavits have been filed on behalf of Union of India (UOI) /

DGS&D as well as by Godrej. Rejoinders thereto have been filed by the

petitioners. We heard the counsel for the petitioners, learned ASG for UOI /

DGS&D and the senior counsel for the respondent no.3 and reserved judgment.

4. It is the defence of the UOI / DGS&D, (i) Rate Contract is an agreement

to supply stores at specified price during the period thereof; no quantities are

mentioned in the Rate Contract and there is no obligation to purchase any

minimum quantity; it is in the nature of standing offer from the supplier and

each supply order constitutes a separate contract, with the supplier being bound

to supply at the rates specified in the contract; (ii) entering into Rate Contracts

saves time and effort in tedious and frequent tendering at multiple user

locations and enables buying as and when required; (iii) for most common user

items, Rate Contracts are concluded on the basis of competitive bidding based

on common standard specifications and often Rate Contracts are concluded

with many suppliers simultaneously; (iv) use of DGS&D Rate Contract is not

mandatory for any Government department; it is entirely up to the user

department to choose any of the Rate Contract holders to place supply order or

to go for its own tendering for covering its requirement/demand; (v) that the

Note dated 16th December, 2013 had no bearing on the conclusion of Rate

Contract with Godrej and in any case the Note dated 16 th December, 2013

stands withdrawn w.e.f. 12th September, 2014; (vi) that the indenters / user

departments have full liberty to buy the product through DGS&D Rate Contract

or through their own tender process; (vii) if any of the items in the subject Rate

Contract is in Micro and Small Scale Sector, it is up to the user department to

procure the same from such sector and DGS&D is not concerned therewith;

(viii) that the policy of reservation even otherwise is applicable only to Central

Government Departments and Ministries only; and, (ix) that office furnishing

products of Godrej cannot be compared in terms of design, feature,

performance and quality parameters with that of SSI firms' products.

UOI / DGS&D have not disputed that the Tender Enquiry was meant

only for products manufactured by Godrej.

5. Godrej in its counter affidavit has pleaded, (i) that the petitioners were

well aware of the tender and the Rate Contract in January, 2014 but did not

protest and have belatedly filed writ petitions in or about October / November,

2014 only; the petitions are thus highly belated; (ii) that it is open to the

petitioners also to approach DGS&D for such a Rate Contract; (iii) that the

Rate Contract awarded to Godrej being a catalogue price Rate Contract, there

was no requirement for following the process of tendering and issue of Tender

Enquiry; and, (iv) the whole purpose of a catalogue based Rate Contract is to

eliminate the procedural delays and technicalities which hinder the various

Government departments from obtaining such quality products as it is difficult

for the user to differentiate between products due to unique manufacturing

process / material being used by each manufacturer and the time consuming

tendering process resulting in delay in procurement of products and delay in

execution of projects and overall loss to the Government.

6. Need is not felt to refer to the rejoinders filed by the petitioners as neither

counsels referred thereto.

7. The counsel for the petitioners, (i) contended that rate contracts for

specific brand can be entered into with respect to spare or ancillary items

required from time to time of products/items/goods/stores already purchased

through Tender Enquiry, to obviate the tender process for such spare / ancillary,

requirement whereof may arise from time to time; attention was invited to the

Circular dated 13th November, 2013 providing inter alia for entering into Rate

Contract on Net Dealer Price basis with respect to automobiles; (ii) invited

attention to document dated 27th August, 2013 purporting to be Chapter 13A of

DGS&D Manual inter alia providing that catalogue procurement is to be used

for conclusion of Rate Contracts for such common user items where

formulation of general / common or broad based specifications is not feasible

for competitive bidding or design feature / performance parameters of such

products differ significantly among the products of different manufacturers and

even between different models of the same manufacturer and / or where

equitable comparison of prices of such products is not feasible; it is contended

that the Rate Contracts for Net Dealer Price cannot be entered into with respect

to office furniture as has been done (we may notice that UOI / DGS&D have

denied the said document); (iii) invited attention to Circular No.68 dated 12th

September, 2014 of the DGS&D requesting the Purchase Directorate to ensure

that items notified for exclusive purchase from Medium and Small Scale Sector

Industries are procured accordingly and it is argued that all the items of the

impugned Tender Enquiry are so reserved; (iv) handed over a copy of the

Gazette Notification dated 23rd March, 2012 listing the items reserved for

purchase from Small Scale Industries/Units and contended that Steel Almirah,

Steel Chair, Steel Desks, Steel Racks/Shelf, Steel Stools and Steel Trunks are

included therein; and, (v) handed over a document titled "Chapter-6:

Procurement of Goods and Services" of General Financial Rules, 2005 (GFR

2005), Rule 141 whereunder titled „Rate Contract‟ provides that Rate Contracts

with registered suppliers for goods and items of standard types which are

identified as common user items and are needed on recurring basis by various

Central Government Ministries or Departments shall be entered into and Rule

144 whereof again provides for items reserved for Small Scale Industries; Rule

154 thereunder provides that single Tender Enquiry shall be made only where a

particular firm is the manufacturer of the required goods and in case of

emergency the required goods are necessarily to be purchased from particular

source and the reason for such decision is to be recorded and approval of

Competent Authority obtained and for standardization of machinery or spare

parts.

8. The learned ASG on behalf of UOI / DGS&D contended that, (i) merely

because DGS&D has entered into the Rate Contract does not prevent the user

department from still floating the tender and only if the user department, inspite

of having a tender at a rate lower than under the Rate Contract still buys under

the Rate Contract it has to record the reasons therefor; (ii) on enquiry it was

informed that no applications are invited for entering into Rate Contract; and,

(iii) that of the tendered items, only Steel Almirah is in the Small Scale Sector.

9. The senior counsel for the Godrej also contended that it is open to the

petitioners to also enter into the Rate Contracts. With liberty sought from us

while reserving judgment, an additional affidavit has been filed annexing

thereto copies of the tenders floated by various Government departments /

institutions during the period 2014-15 for procurement of office furniture

inspite of the Rate Contract with Godrej.

10. From our experience, of procurement of articles for the Courts, of the

tendency to where ever a DGS&D Rate Contract exists, avoid the tedious

process of inviting tenders, we during the hearing asked the learned ASG and

the senior counsel for Godrej that whether not from the factum of DGS&D

having entered into a Rate Contract with Godrej, there is likelihood of most of

the user departments opting for Godrej items and thereby giving Godrej an

advantage over the other manufacturers / suppliers of same items.

11. The only answer which was forthcoming was that the user departments

are not bound to do so.

12. We had during the hearing further enquired from the learned ASG

whether there is any document recording the decision for preferring Godrej

brand only for the subject items or to standardize the said items in all the user

departments.

13. No such document has been filed / was shown.

14. We, in the said state of affairs are intrigued as to why a Tender Enquiry

open only to Godrej was floated and the Rate Contract entered into with

Godrej. If the intent was to enter into a Rate Contract with Godrej, there was no

need to float a Tender Enquiry; by specifying the brand of goods / items of

Godrej in the said Enquiry, the floating of tender in which none else could

participate, appears to be farcical. The explanation in the counter affidavit of

UOI / DGS&D that it was done only to fulfill the requirement of online

software is unacceptable. Rather, it has to be held that the online software also

has been devised in accordance with the DGS&D Manual as discussed herein

below. Further, if it was felt that the requirement of nearly all the user

departments of the products / items / goods / stores subject matter of the said

Tender Enquiry was a recurring one and did not call for each of the user

departments separately floating tenders therefor, certainly opportunity to all

manufacturers / suppliers of such items should have been given. Again, if it

was felt that all user departments should procure said products / items / goods /

stores of Godrej brand only, a decision in writing giving reasons would have

existed.

15. Though Godrej has with the additional affidavit aforesaid filed Notices

Inviting Tenders for the said items which have been floated by various user

departments inspite of the said Rate Contract but has shied from disclosing its

sale figures under the Rate Contract. It is well nigh possible that the quantities

for which tenders have still been floated are negligible vis-à-vis quantities

purchased under the Rate Contract.

16. The petitioners are thus found to be correct in their contention that

Godrej has been favoured and given an undue advantage by entering into a Rate

Contract with it for items manufactured and supplied by a number of other

suppliers and without any justification for preferring the Godrej brand. Once,

open tendering has been emphasized, anything done to come in the way of said

open tendering will necessarily invite suspicion. Though it was repeatedly

contended that the petitioners are also free to enter into Rate Contracts with

UOI / DGS&D but on our enquiry that in such an event which Rate Contract

the user department is to prefer, again no answer was forthcoming. Thus,

modus suggested also vests a discretion in the user department to prefer one

Rate Contract against another and which is the antithesis of policy and principle

of open tendering.

17. All counsels had argued de hors the DGS&D Manual containing the

policies and procedures adopted by the DGS&D for purchase. We asked the

learned ASG to supply a copy thereof. A copy of the Manual effective from 1 st

October, 1999 was handed over. Clauses 3.1 and 3.2 thereof in Chapter 3 titled

"Procurement Objective and Purchase Policy" are as under:

" 3.1 PROCUREMENT OBJECTIVE: The main objectives of public buying are :-

(i) To procure stores of specified quantity and specified quality.

(ii) To procure stores on a competitive basis at the lowest reasonable price.

(iii) To procure stores with a planned timely delivery. 3.2 PURCHASE POLICY: The purchase policy adopted in DGS&D procurement process is as per the guidelines of General Financial Rules (GFR) and the salient features of which are :

(a) to make purchase of stores for public service in such a way as to encourage development of indigenous production of stores to the utmost possible extent.

(b) to provide price and or purchase preference upto specified limit as may be prescribed by the Government from time to time to the stores manufactured by Cottage and Small Scale Industries and Public Sector Undertakings over those manufactured by private large scale industries.

(c) to ensure quality of products and timely supplies."

18. We further find that Chaper-13 of the said Manual relates to „Rate

Contracts‟ and Clauses 13.1.3, 13.2.1, 13.3, 13.8, 13.14.1, 13.14.2(c)(iii),

13.15, 13.16 and 13.28.1 thereof are as under:-

"13.1 DISTINCTIVE FEATURES:

.......

13.1.3 The supply orders can be placed on any of the rate contract holding firm(s) either directly by the authorized officers of the indentors (known as Direct Demanding Officers) or by the DGS&D subject to such restrictions as are mentioned in the rate contract.

13.2 STORES FOR WHICH RATE CONTRACTS TO BE CONCLUDED:

13.2.1 The items which fulfil the following criteria are considered for rate contract;

a) Items of standard types preferably having BIS specifications.

b) Items which are identified as common user items and are needed on recurring basis.

c) Items for which prices are likely to be stable and not subject to considerable market fluctuations.

d) However, there are certain items which are common and in regular demand and are material intensive prices of which are subject to market price fluctuations. Rate contract for such items could be considered with provision of price variation to account for fluctuation of market rates of raw-material etc.

e) Items for which R/C is convenient to operate. For instance, in the case of items of low value and which are required by indentors in small quantities, rate contracts may not be convenient to operate.

f) Items with an estimated annual drawals of Rs.25 lakhs or more.

g) As many items as possible should be on rate contract.

h) Rate Contract may not be concluded for the scarce/critical/short supply items.

13.3 AUTHORITY COMPETENT TO BRING/DELETE AN ITEM ON RATE CONTRACT 13.3.1 The decision to bring or delete an item on / from rate contract will be taken by the Standing Review Committee (SRC) under the Chairmanship of DG(S&D) except for those items which were earlier brought on rate contract or deleted from the rate contract on the directions of Department of Supply. In all such cases subsequent decision to delete or bring an item on rate contract will be taken by the Standing Review Committee with the approval of Department of Supply. 13.3.2 The Committee associates representatives from major indenting departments like Defence, Railways, Home Affairs, Health, Telecommunications, State Governments and Trade organizations.

13.3.3 The above Standing Review Committee will be assisted by a Sub-Committee under the Chairmanship of ADG (Supplies) with Director (CDN) as Member-Secretary. The Sub Committee may co-opt representatives from major indentors and one representative from trade as members, if considered necessary.

13.3.4 The suggestions to bring new items on rate contract will be sent to /received by the Member-Secretary who will place them before the sub-committee for consideration. If the item is considered R/C - worthy by the Sub-Committee, it will be allotted to the Purchase Directorate.

13.3.5 The concerned Purchase Directorate will collect the data related to the suggested item for its compliance with the criteria prescribed for bringing the item on rate contract. They

would interact with Quality Assurance Wing to finalize the specification for the item suggested.

13.3.6 Where it is considered necessary to consult the Industry/likely DDOs the Purchase Director concerned shall call for a meeting at the competent level with the trade/industry/likely DDOs associating the QA Wing. 13.3.7 In cases in which there exists slight divergence standard, efforts should be made to secure codification and standardization and when standardization has been effected, such stores should be recommended to be purchased on the basis of rate contracts.

13.3.8 The data so collected will be forwarded to the Member Secretary for perusal by the Sub-Committee. The Sub Committee will scrutinize the data to check whether the suggested item could be brought on rate contract and place its recommendations before the Standing Review Committee for its considerations and approval.

13.3.9 Once an item is approved by SRC, fresh approval of SRC is not required for each and every size/capacity of items to be brought on rate contract. Directorate may conclude rate contract as long as criteria are satisfied keeping in view the broad category of item already stands approved by SRC. 13.3.10 The Sub-Committee may meet once in a month to take a view on the items already projected and submit their report to DG. The Standing Review Committee may meet once in a quarter.

13.8 TENDER ENQUIRY PREPARATION AND ISSUE OF:

13.8.1 Regarding preparation of the tender enquiry, fixation of time and date for receipt, opening of tenders, time to be allowed to tenderers to quote publicity and issue of tender enquiry etc. the instructions contained in Chapter-8 will mutatis-mutandis apply and may be referred to.

            13.14 PROPOSAL                   FOR       CONCLUSION       OF   RATE
           CONTRACT :

13.14.1 The proposal for rate contract should be prefaced with a synopsis on production, demand and supply position of stores in question bringing out clearly the minimum number of firms required to be brought on parallel rate contract based on their capacity and the estimated annual requirements. ......

13.14.2 The rate contract proposal/brief for TPC or TAC will essentially consist of details given in Annexure - 38. It should take into consideration;

.........

c) REASONABILITY OF PRICES PROPOSED TO BE ACCEPTED:

........

iii) Parameters which are relevant to determine the reasonableness of the prices should be ascertained in advance so that at the time of opening of tenders the purchaser is in possession of all necessary information to make an appropriate evaluation of offers and thus, conclude rate contract in time at reasonable and justifiable prices.

           13.15 CONCLUSION                          OF         PARALLEL    RATE
           CONTRACTS:

13.15.1 Proposals may be worked out for entering into parallel rate contracts with minimum number of firms, which in any case be not less than two by considering ;

(a) the capacity of the tendering firms

(b) the quantity committed against the existing Rate Contracts.

(c) The estimated annual requirement and

(d) Reasonable price range so as to include products of established and reputed manufacturers as also items

produced by different sectors so that Indenting Departments will have wider choice.

13.15.2 The competent purchase officer on merits of each case can decide the number of firms to be awarded Rate Contracts for an item, so that Indenting Departments will have wider choice 13.15.3 Efforts should be made to conclude rate contracts with the firms located in different parts of the country. 13.15.4 The actual drawals of the rate contract though not routed through the DGS&D rate contracts, may be much more. On the assumption that drawals by all agencies will be twice the drawals of expired R/Cs and the firms may commit 50% of the assessed capacity for production of rate contract items, the annual drawal of rate contract may be taken as four times the actual drawals of the current rate contract. 13.15.5 Since the full capacity of the firms is not always available to meet the rate contract requirement, 50% of the firm's assessed capacity/proven capacity should be counted towards rate contract supplies and rest of the capacity may be presumed to be for non-rate contract supplies. The competent purchase officer may, therefore, go down upto 50% of the capacity/proven capacity if the circumstances so warrant. 13.15.6 Price range of 5% can be considered to be reasonable. However, the competent purchase officer may take a decision on merits of each case.

13.16 NEGOTIATION/COUNTER OFFER :

13.16.1 Post Tender Negotiations should be avoided and the rate contracts may be concluded without negotiations by following the guidelines given above for conclusion of parallel rate contracts with adequate number of firms at prices within reasonable range to meet the estimated drawals. 13.16.2 In cases where the price of L1 is considered acceptable, but there are not enough firms within the reasonable price range, R/C may be concluded with L1 and its

price, counter offered to all other higher quoting firms. L1 may be informed of the action and be told that an opportunity is also being given to them to reduce the rate at which R/C has been awarded. All firms will be asked to send their response in sealed covers to be opened in public as per the target date and time fixed for reply. Those who accept the counter offered prices or below may be awarded parallel rate contracts to meet the estimated drawals.

13.16.3 Where, however, the price of L1 is not acceptable, Purchase Directorate may in the first instance negotiate with L1 only for arriving at a reasonable/acceptable price. On successful conclusion of negotiations with L1, R/C may be awarded to the L1 at the agreed negotiated price and the same may be counter offered to all the other higher quoting firms and the parallel R/Cs concluded in the same manner as above. 13.16.4 If the negotiations with L1 is not successful, the price considered as reasonable may be counter offered to the higher quoting firms including L1.

13.16.5 In situations where new comers or firms with unfavourable reports happen to quote an unreasonably low price, such offers may not be ignored. However, if such offers are made, it may not be desirable to treat such offers as L1 for negotiations and the purchase directorate may decide the technically acceptable and reasonable L1 firm with the approval of the competent authority for the purpose of above exercise.

13.28 ISSUE OF PARALLEL RATE CONTRACTS:

13.28.1 As soon as the decision to award rate contract to more than one firm is taken, contracts should be issued to all the firms simultaneously and not on different dates. This would avoid adverse criticism from the trade against discrimination, favouritism and corruption. Where, however, decision to conclude parallel rate contract is taken on different dates, parallel rate contracts can be issued on different dates as and when decision is taken."

19. As would be obvious from the aforesaid, the procedure prescribed for

entering into Rate Contract has not been followed.

I. The impugned Tender Enquiry and the Rate Contract are not in

accordance with the Purchase Policy to procure stores on a competitive basis

at the lowest reasonable price and as per the Guidelines of the General

Financial Rules.

II. Without any decision, that the goods/stores tendered for, only of

Godrej brand are the standard type and without identifying the Godrej brand

of said goods as common user items needed on recurring basis or are

otherwise identifying the goods/stores of Godrej brand within the meaning

of Clause 13.2, for which only Rate Contracts can be concluded, the Rate

Contract was concluded with Godrej.

III. Clause 13.1.3 supra contemplates entering into Rate Contract with all

the eligible suppliers of the goods/stores for which Rate Contracts can be

concluded. However no opportunity was given to any supplier other than

Godrej for entering into the Rate Contract. Rather, by specifying the Godrej

brand, the other suppliers were expressly excluded.

IV. No decision of the SRC, within the meaning of Clause 13.3, to bring

the subject goods/stores within the list of items for which Rate Contracts can

be concluded has been shown. Clause 13.3 lays down the detailed procedure

for bringing an item of goods/stores in the list of goods / stores for which

Rate Contracts can be concluded. The said procedure has obviously not been

followed.

V. Clause 13.8 requires the procedure prescribed in Chapter 8 of the

Manual to be followed for Tenders for Rate Contracts also. Chapter 8

contemplates inviting Tenders from all manufacturers/suppliers of the

goods/stores. Clause 8.2(c) thereof provides that the system of inviting

Single Tender Enquiry is to be adopted in case of stores where it is to the

knowledge of the purchaser that only a particular firm is the manufacturer of

the store demanded or as per policy of Government, purchase is to be made

only from selected firm. It has not been pleaded/shown that there is any

policy to purchase the subject goods/stores only from Godrej. On the

contrary, by contending that that the petitioners can also enter into Rate

Contracts for the subject goods/stores, it has been expressly admitted that

Godrej is not the only manufacturer/supplier of the subject goods/stores.

VI. Clause 13.14.1 contemplates drawing up of a proposal for Rate

Contracts inter alia specifying the minimum number of firms required to be

bought on parallel Rate Contract. No proposal, if any drawn up, has been

shown and no reason has been given why in the said proposal, if any, only

Godrej was brought on Rate Contract.

VII. Clause 13.4.2(c)(iii) also requires ascertaining in advance of prices

before the opening of tenders for Rate Contracts. No such ascertainment is

pleaded to have been done.

VIII. Clause 13.15 again contemplates entering simultaneously into Rate

Contracts with several manufacturers/suppliers. In contravention thereof,

only Godrej was preferred for entering into the Rate Contract.

IX. Clause 13.16 again contemplates tenders for Rate Contracts to be

open to all manufacturers/suppliers and Rate Contracts being entered into

with the L1 tenderer. By inviting tenders only of Godrej brand of

goods/stores, Clause 13.16 has not been followed.

X. Clause 13.28 again provides for simultaneously entering into Rate

Contracts with more than one firm, where the same is not to be entered into

with the L1 tenderer.

20. The conclusion is that the Rate Contract entered into with Godrej is not

in accordance with DGS&D‟s own Manual. It is perhaps for this reason only

that the UOI / DGS&D shied from, in their counter affidavit, quoting from their

own Manual or from citing the same.

21. The counsel for UOI / DGS&D on 25th February, 2015 handed over

certain extracts from the General Financial Rules, 2005 of Ministry of Finance

and the recommendations of the Committee on Public Procurement on

procurement through DGS&D dated 3rd October, 2012 but could not explain the

applicability thereof to the subject. It is/was not even the contention of any

counsel that the copy of the DGS&D Manual handed over by the learned ASG

was not applicable. The counsel for UOI/DGS&D has after the close of hearing

also filed a synopsis of submissions stating that DGS&D has entered into a Net

Dealer Price (NDP) Rate Contract with Godrej pursuant to negotiations held

with Godrej. However the same does not address the lacunas we have pointed

out hereinabove. Else in the said synopsis, the contentions already noted and

dealt with above have been reiterated and Rules 140, 141 and 147 of the

General Financial Rules, 2005 and Clauses 3.16, 14.5, 14.6 of the Manual on

Policies and Procedures for Purchase of Goods issued by the Ministry of

Finance, Department of Expenditure are quoted. However, none of them are

found to be negating the provisions noted hereinabove from the DGS&D

Manual. In fact Clause 14.6 thereof provides for NDP Rate Contracts for

automobiles, sophisticated equipment, machinery etc. However, as aforesaid no

decision to include the subject goods, and for which the DGS&D even now is

ready to enter into a Rate Contract with the petitioners, in the list of

sophisticated equipment/machinery where the design feature, performance

parameters differ and equitable comparison of prices is not feasible, is shown.

22. In the light of the aforesaid, we do not deem it necessary to decide the

plea of the petitioners of the subject goods falling in the list of items to be

purchased from Small Scale Industries and in which respect we do not find

either of the parties to have demonstrated any clarity.

23. The counsel for the petitioners relied on Delite Kom Limited Vs.

Government of NCT of Delhi 150 (2008) DLT 138 (DB) and Times

Innovative Media Ltd. Vs. Delhi Transport Infrastructure Development

Corporation Ltd. MANU/DE/0766/2013 (DB). In the former, it was observed

that though Godrej is a reputed and recognized company dealing in furniture

including modular furniture and compactors but that does not mean that other

companies which may be equally good should be excluded from consideration.

It was held that the same will completely stifle private enterprise and

competition. It was further held that ordinarily the contract is awarded to the

lowest tenderer and finding that the Tendering Department while inviting the

tenders had not considered the other manufacturers, the contract awarded to

Godrej was not approved of. In Times Innovative Media Ltd., on a conspectus

of a plethora of case law, the award of contract without open tendering was

quashed.

24. Reference in this regard may also be made to:

a) Nex Tenders (India) Private Limited Vs. Ministry of Commerce

and Industry MANU/DE/0337/2009 where a Division Bench of this

Court held that DGS&D being the business arm of the Government

is expected to drive a hard bargain in public interest and the action

of DGS&D of disregarding its own Manual and eliminating

competition was deprecated. The conditions in which Limited

Tender Enquiry can be floated were specified and finding the

contract in that case to be not fulfilling the said criteria, the

challenge thereto was allowed.

b) Union of India Vs. Dinesh Engineering Corporation (2001) 8 SCC

491 where it was held that even where the spare part is required to

adhere to strict standards, monopoly in favour of one supplier

cannot be created without considering the spare parts offered by the

other suppliers.